Shenzhen Chiwan Wharf announced its 2012 results and profit distribution plan. The Company plans to pay cash dividend of RMB3.63 (tax inclusive) to shareholders for every 10 shares they hold.

2012 results came in line with expectations. Container throughput went down 8.3% because of global economic downturn and hinterland industry relocation. 1) In the reporting period, the Company posted revenue of RMB1.784B, up 4.43% YoY; net profit attributable to shareholders of listed company declined 7.62% YoY to RMB467M, or EPS of RMB0.724. Its net profit met our estimate of RMB465M (0.43% difference) and surpassed market anticipation of RMB455M by 2.64%. 2) Influenced by poor global economic environment and hinterland manufacturing industry relocation , the Company’s container throughput dived 8.3% YoY to 5.311M TEU in 2012. In the same reporting period, container throughput at all ports in Shenzhen grew 1.7% YoY. Correspondingly, the Company’s container business market share in Shenzhen dropped 2.5ppts to 23.2% and decreased for the second straight year. Bulk cargo throughput increased by 15.7% YoY to 10.699M tons and its market share basically remained flat.

Business performance is expected to improve along with global economic recovery. Container throughput for 2013 is estimated to grow 5% YoY. 1) In 2012, the Company suffered from declines in both the container throughput and the number of container liner berthing routes. Gloomy economic situation and hinterland industry transformation & relocation dragged the Company’s container throughput down 8.3% to 5.311M TEU. Of which container throughput at Mawan Port tumbled 18.4% YoY to 1.363M TEU; container throughput at Chiwan plunged 4.2% YoY to 3.947M TEU. The number of container liner berthing route stood lowest at 43, less than that in 2011. 2) We forecast container throughput to jump 5% YoY in 2013. In the first two months of 2013, the Company’s container throughput rose 5.6% YoY to 884K TEU, thanks to steady economic recovery in the United States and st able economic situation in Europe. In particular, container throughput at Chiwan increased sharply by 11.4% YoY to 665K TEU. However, the number of berthing routes remained low at 44 in Jan -Feb 2013.

We maintain 2013-2014 EPS estimates of RMB0.74 and RMB0. 76, representing PEs of 18.5x and 18x, respectively. Due to the market anticipation of asset restructuring and the focus on development of Qianhai, the Company’s valuation has been significantly higher than the average PE of domestic port industry (12.5X) and international port industry (11.9X). We maintain “Neutral” investment rating.